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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Herman J. Matos who wrote (43)	2/11/1997 8:43:00 PM
From: Herman J. Matos	of 14162

HOW TO WRITE COVERED CALLS - A REAL CASE STUDY! ================================================================== PAGE #6 Date: Tuesday, Feb. 11, 1997 The stock: ROSS STORES (ROST) Last traded at $45.50 up 1/2 on Tuesdays' close. The 2 for 1 split - Record date was today (Feb. 11, 1997). So, the stock is up so far 1 1/2 since Friday's close and is getting closer to the stock's high of $53.00. Note - the year's low price was $22 1/4. ================================================================== SITUATION: Hi Everybody! ROSS Stores is doing just fine! If you purchased the stock itself you need to sit tight until the stock price actually splits in half. Then we will wait and observe the momemtum before we hook into our first hungry poker player (call buyer). NEXT MOVE! If you picked up the one of the March Calls (40 or 45) you have a nice down stroke on your profit! Every little bit helps. I picked up two March 40 calls at 6 1/8 so that 6.5 - 6.125 = .3752=$75.00/1,265=5.93%. That's almost a 6% rate of return in two days. Wait until I take a bite out of my call buyers. Between the appreciation in the stock price and the calls it should be a 45%+ month with this stock! And wait! Don't forget the dividend $.045/sh ($4.50/100 shares) being paid out! NOT BAD! N O T E - Our next important date is MARCH 10, 1997 RECORD DATE FOR DIVIDEND! Very Important if you are holding the calls! You must buy your stocks no less than three days from the above date, but, let's make that 4 days so Tuesday MARCH 4, 1997 you must dig deep into your pockets and cough up the dough. After that dividend capture the stock will be split and you get your two for one shares. GOOD TIMES AHEAD! The heat is on for the rest of March. Next earnings report will be the week of March 18, 1997 followed by the March 21, 1997 Options Expiration date! I don't know at this time if I will write calls with all that action. The open interest in the calls is building up nicely. Between the 40 and 45 that comes to 146+675=820 contracts as of today out there for the March calls and they all will most likely exercise their options since the stock price will be at and in the money. Those contracts will double in the number of shares being handed out. So, 1,640 is the actual number of contracts buying rights. JUST HOLD - WRITE NO CALLS YET! Writing a call now would not be smart since the stock is trading near it's high, the stock should trade somewhere in the mid 20's price range (after the split) which is very a comfortable price range for most investors. We will wait to reel in the really big fish! ROSS STORES ...Bid.........Ask....Last...Change..Volume ....45 3/8...45..1/2..45 1/2 +1/2.....233200 ROST March 40 Call ...Bid...Ask....Last....Change....Volume.....Open Interest ..6 3/8..6 1/2..6 1/2...+3/8.......15...........146 ROST March 45 Strike ....Bid....Ask....Last....Change....Volume....Open Interest ...3 1/8..3 3/8..3 1/4....+1/4........143........672 END OF PAGE #6 CONTINUE TO PAGE #7 ********************************************************************************* DISCLAIMER: The writer is presenting a real stock and a live ongoing case study. No recommendations or endorsement to actually buy this stock are suggested nor implied. Trading stocks and buying calls should not be attempted without first understanding the risk/rewards of this type of investment! The writer assumes no responsibility for the opinions being expressed! Buyers always be aware! **********************************************************************************

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